More than half of oil and gas leases are idle, Interior Department says
By Steven Mufson,
On the eve of a speech on energy by President Obama, the Interior Department released a report asserting that more than two-thirds of offshore leases in the Gulf of Mexico and more than half of onshore leases on federal lands “sit idle.”
The report issued Tuesday is, in part, a counterattack on the oil industry, which together with GOP lawmakers has harshly attacked Interior for delays in issuing new offshore-drilling permits. The administration counters that it has acted as fast as can be expected less than a year after dealing with the massive Gulf of Mexico oil spill.
The report also revives an issue that has been mostly dormant since the 2008 campaign, when members of Congress and some presidential candidates backed a “use it or lose it” measure that would try to compel companies to drill.
Interior Secretary Ken Salazar said the administration will seek to “provide incentives to companies to bring production online quickly and safely.”
Obama’s speech will focus on broader energy goals, part of his response to rising oil prices and turmoil in the Middle East.
The Interior Department’s report says more than 70 percent of offshore acres currently leased to oil companies are “inactive.” Interior’s definition includes leases that are not producing oil or gas and are not in possession of approved or pending exploration or development plans. The department said that covers almost 24 million leased acres in the Gulf of Mexico, which it said could “potentially” hold more than 11 billion barrels of oil and 50 trillion cubic feet of natural gas.
But oil companies say many leases, especially in the deep waters of the gulf, require lengthy planning, seismic data collection, environmental surveys and other preparation before firms invest in costly exploration wells and later in multibillion-dollar production infrastructure. The government does not count those preparations in its definition of active leases.
The companies also note that under current lease agreements with the federal government, any company that fails to drill on an offshore lease in deep water within 10 years must return the tract to the government — effectively a “use it or lose it” clause. Lease terms range from five to seven years in shallower waters.
“We do not hold leases that we do not plan to develop,” said Kurt Glaubitz, a spokesman for Chevron. “In fact, we have returned 360 leases to the federal government since 2008 after determining that we could not find oil and gas in sufficient quantities.”
Chevron, one of the most active companies in the Gulf of Mexico, has 1,800 other leases, and Glaubitz said 70 percent of them are currently producing oil and gas.
“The government considers leases ‘undeveloped’ until they produce first oil,” Glaubitz said. But he added that “significant activity and investment are occurring at many of our federal leases currently classified by the government as ‘undeveloped.’ ”
The Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement has recommended shortening leases in 800 to 1,600 feet of water from 10 years to seven.
Salazar said, “These are resources that belong to the American people, and they expect those supplies to be developed in a timely and responsible manner and with a fair return to taxpayers.”